After several years defined by volatility, scarcity, and historically high borrowing costs, the mortgage industry enters 2026 with something it hasn’t had in a while: a cautious, but genuine, sense of optimism. That sentiment was palpable at the MBA Annual conference, where the collective mood reflected a meaningful shift from the exhaustion of 2023 and the grinding uncertainty that clouded 2024. Lenders, economists, and market participants seemed aligned in a shared belief that the worst is behind us. Purchase activity has stabilized, refinance opportunities have resurfaced sooner than expected, and origination volume for 2025 is now expected to finish just above $2 trillion, an improvement that would have sounded ambitious a year ago.
Yet optimism is measured for a reason. Rates remained stubbornly higher than many expected at the outset of 2025, forcing forecast revisions and tempering industry hopes for a more dramatic rebound. Even so, the market showed resilience: purchase demand held at a healthy pace, and refinances (driven largely by borrowers exiting loans issued during the 7+ percent rate period) materialized even with rates settling only into the low-6 percent range. In a cycle where small rate moves carry outsized psychological weight, even 20 to 30-basis points of relief proved enough to bring meaningful volume back into the market. This dynamic has pushed industry economists to continually recalibrate expectations while acknowledging that “optimism” cannot be the sole input in forecasting.
Forecasting mortgage originations is far more complex than projecting interest rates or extrapolating historical cycles. Purchase and refinance forecasts are constructed from fundamentally different drivers. Purchase volume begins with expectations for home sales, both new and existing, which the MBA currently anticipates rising 2–5 percent over the next two years. This optimism is rooted in a long-awaited increase in inventory, caused partly by cooling home price growth and, in some regions, outright price declines. These shifts are giving sidelined buyers more room to breathe, even if affordability remains significantly stretched relative to pre-pandemic norms.
Refinances, by contrast, are almost entirely a function of rate movements and borrower incentives. For much of 2024 and early 2025, many believed that a meaningful refi wave would require rates falling well into the 5s. That assumption proved too rigid. Borrowers with recently originated loans carrying rates above 7 percent found substantial monthly savings even when refinancing into mortgages in the low-6s. Loan size amplified this effect: in higher-cost metros, a modest rate improvement can translate into hundreds of dollars of monthly relief. As a result, MBA’s refi forecasts, initially conservative, were revised upward as refi activity outpaced expectations.
Still, it’s important to temper expectations. The MBA now expects mortgage rates to generally stabilize between 6 percent and 6.5 percent over the next two years. That range is not low by historical standards, but it is sufficiently below peak pandemic-era highs to sustain steady purchase activity and an opportunistic refi market. The industry’s optimism, then, is grounded not in hopes of a dramatic rate collapse but in the belief that the market is recalibrating to a new, and more manageable, normal.
Assessing the health of the housing market requires abandoning the idea of a singular “U.S. housing market.” The national picture shows moderating price growth and rising inventory, conditions that look healthy when viewed from 30,000 feet. But the real story is tied to place, timing, and who exactly is doing the buying or selling.
In parts of the Sun Belt and West, prices have cooled materially, and homes are sitting on the market longer. For would-be buyers who spent the last two years priced out of the market, this shift represents long-awaited relief. For those who purchased recently at elevated prices, the same trends may resemble erosion of equity. Meanwhile, markets in the Northeast and Midwest continue to see historically tight inventory and sustained price growth well above the national average.
This fragmentation underscores a deeper reality: industry assessments that rely too heavily on national averages risk misdiagnosing what is actually happening on the ground. Housing remains fundamentally local, and in 2026 that truth is more apparent than ever. Healthy conditions in one market can coexist with deteriorating affordability in another. What unites them, however, is a gradual normalization following several years of acute supply-demand imbalance.
Complicating the mortgage industry’s outlook is the unusual backdrop of missing macroeconomic data. The extended government shutdown, the longest in U.S. history, left the Federal Reserve navigating without critical releases such as October CPI and nonfarm payrolls. Fed Chair Jerome Powell likened the situation to “driving in a fog,” and the absence of clarity contributed to speculation that the central bank would slow the pace of rate cuts.
Fortunately, alternative indicators helped fill some gaps. Wage growth, as tracked by the Atlanta Fed, continued to cool, reinforcing evidence of a softening labor market. Employers appear less aggressive in hiring and compensation, consistent with a broader economic deceleration. Mortgage market participants, meanwhile, observed a lull in volatility, a direct reflection of fewer data-driven surprises.
Still, once the BLS resumes releasing official data, markets should brace for renewed movement. Whether volatility leads to lower mortgage rates or reverses recent declines depends heavily on whether the data confirms continued labor-market weakening or reveals new inflationary pressure. Mortgage professionals should expect a brief period of rate instability as markets digest multiple months of pent-up data in rapid succession.
Perhaps the most unsettling question facing economists is the trajectory of the labor market. MBA’s October forecast anticipates unemployment rising above 4.5 percent by year-end and reaching roughly 4.7 percent by 2026. Some portion of this softening reflects expected cyclical cooling. But another part, harder to quantify, stems from the evolving impact of AI on hiring, staffing, and productivity.
High-profile layoffs at major employers have raised the question of whether the U.S. labor market is on the cusp of a more disruptive technological transition. Economists, like myself, remain cautious but not alarmed. Early signs of stress (e.g., rising unemployment for recent college graduates in tech-adjacent fields) suggest AI-driven displacement is real, but still localized. The more optimistic scenario is one of short-term adjustment followed by medium-term productivity gains, job reallocation, and new sectoral growth. In other words, disruption does not necessarily imply deterioration.
For now, the outlook is one of balanced concern: a recognition that the labor market is weakening, but not yet unraveling. Mortgage professionals should prepare for a landscape defined by slower hiring, moderating wage growth, and lingering uncertainty about how quickly displaced workers can transition into emerging roles.
Across the mortgage ecosystem, 2026 appears poised to be a year of incremental improvement rather than dramatic transformation. Origination volumes are rising. Inventory is returning. Price pressures are easing. Borrowers are adapting to a new rate environment, and lenders are finding opportunities even in modest shifts. Optimism exists, but it is tempered by structural realities: affordability challenges, labor-market uncertainty, and a Federal Reserve still parsing incomplete information.
In many ways, this is exactly what a healthy recovery looks like: not a V-shaped rebound, but a steady climb back toward equilibrium. The mortgage industry is not fully out of the woods, but it is no longer lost in them. And after the last several years, that itself is meaningful progress.